A lot of homeowner’s have had to face difficult times with mortgage payments in recent months because of global recession hitting everyone hard in their faces. Many homeowners’ have even gone bankrupt. But is there any hope of re-building your house after bankruptcy? Are lenders ready to finance you after your credit score touches rock bottom? The answer is yes. Bankruptcy is no longer a lifelong taboo. Though it can remain on your credit history for 10 years but its effect starts getting lesser once your case is closed. Also, filing for a chapter 13 bankruptcy is better than filing for a chapter 7 bankruptcy as the former one stays on the credit card for 7 years while the latter one stays on for 10 years. In chapter 13 bankruptcy, the debtor follows a repayment plan to repay the listed debts taken from the lender.
All you have to do after your case is closed is try to rebuild your credit rating. You can do this by adopting responsible credit habits like paying bills on time, not applying for too much credit at a time and using a fraction of the available credit at one time. Another smart choice for those who cannot handle credit well is living on cash-only basis. Remember having some credit items that you are paying on time will help a lot in improving your credit score.
Another thing you can do is limit the number of bank loans or other debts like having a lot of credit cards. The more debt you have, the more difficult it will be for you to qualify for a loan.
If you have filed for bankruptcy, it’s high time that you manage your finances well so that this doesn’t happen again with you. Try to limit your overspending, make budget and save for difficult times. You should always have an emergency fund in case you land up in trouble financially. Make sure that you have a proper medical insurance in place if medical bills were a problem the first time.
You have to remember that you may not be able to get a 100% financing from the lenders for your mortgage if you plan to buy a house within a couple of years of bankruptcy. Also, you may have to pay a higher interest as compared to other borrowers who don’t have bankruptcy on their credit score. So the best solution to qualify for a mortgage after a bankruptcy is to wait till you rebuild your credit rating.
The debt-to-income ratio is what the lenders look at when they are deciding whether to finance your mortgage or not. So make sure that you have verification of a consistent income and reduce the amount of debt you have (one way is to cut down on a lot of credit cards). Your paystubs and tax returns will be required when you apply for loan after bankruptcy. This is because the lenders need to be reassured that you will be able to pay the loan.
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